June 10, 2020

|

by: Jonathan Hung

|

Categories: Angel Investor, Startup Funding

The Perfect Startup Pitch Deck: An Angel Perspective

As a startup entrepreneur, one of the most critical sets of documents that you will prepare the perfect startup pitch deck. This term denotes the presentation that you will give to prospective investors, letting them know how fantastic your company is and giving them a solid reason to invest in your business. Typically, pitch decks come into play as early as the seed stage and most definitely at the VC and Series A round of funding. The pitch deck is what investors use to compare you to other potential investments, gauge your current performance, and learn what your strategy is going forward.

Conceptually, although a pitch deck sounds like it would be a simple topic, in reality, it’s quite detailed. There’s a lot of content that people often want to include, but sometimes less is more. If you’re going to dazzle people with your business, here are the seven things that you need to include within your presentation.

Your Story

This one sounds obvious, but it’s worth mentioning. Your presentation needs to include your story. More than your plan, though, it has to tell a story. Why you created the company, why it’s important. Why will customers want this product? How will your service better the world? What motivated you to pursue this dream?

The pitch deck is supposed to get your investors excited about you and your company. A good story will go a long way towards doing that. In a sense, it is a marketing document to generate interest and desire. Too many people think that a pitch deck should be filled with nothing but numbers and statistics. While you do need to back up your story with some standard facts and figures, a good story is a framework and context for your business.

To illustrate this, suppose you were looking to create a website like Twitter. Your idea is to have a social media platform with small, easily-readable posts that don’t contain a lot of information. If you tell investors that’s your idea, they would probably scratch their heads in bewilderment. Why would they invest in a platform that actively seeks to reduce text and constrain what users can post? Other platforms are much more flexible, so why would that idea be a hit?

However, if you break down the reasons you believe your idea will succeed, you craft a story that investors can follow. In the case of your simple social media site, the narrative could be that people are busy. They want to read through multiple news sources, get updates on friends, etc., without having to wade through significant amounts of content. This site can fill a different gap by providing people with easily-digestible updates and links if they want to learn more information.

Your pitch deck should walk through your product and the reasons you believe it will be a success. It doesn’t have to have significant technical depth, just enough to make prospective investors feel like your business has a real chance of success.

Your Team

Startup investors choose companies based more on the team than they do the product itself. Investors believe that the right group will be able to accomplish challenges and make the business a success. By contrast, the wrong team can have the best product in the world, but if fighting and conflict are commonplace in the group, you’re just going to run into issues. Therefore, your team is essential.

Demonstrating a broad mix of skillsets is the best way to go. If you are building a business online, for example, and all of your team are developers then you are missing some key skills to make sure your business succeeds. You need people who can market and understand the finances not just code

To show that you have the right team for your company, you should showcase their diverse knowledge. Investors want to see that you will have the expertise to tackle the challenges that will come your way. Highlight business expertise and specific skills, such as marketing prowess, sales, and so on. Put yourself in the shoes of the investor. The more robust the team is, the more trust there is between members, the easier it is to feel comfortable cutting the check.

It’s also often helpful to highlight any previous startup experience within your team. If any of your team members have had a successful startup exit, that’s most definitely something you will want to highlight.

Showcase your team prominently within your perfect pitch deck and tell investors what they can bring to your enterprise. By letting investors know the depth and breadth of experience they bring, you’ll show them how you have all the talent and resources that it will take to be successful.

Your Business Model

Your business model is fundamental, even at the earliest stages of the startup process. If you have no concrete plans on how to turn this venture into a profitable enterprise, it will be challenging to convince an investor to put any money into it. Therefore, it’s vital to have a vision for turning your enterprise into a profitable venture, even if that may be years off.

The business model you have should show some essential components, including your revenue sources and customer projections. If you’re going to be looking to secure financing or have other investment rounds, you may also wish to include some brief details in your pitch deck. Don’t overload, but it gives a boost to investor confidence if they know that you have thoroughly considered your business model and future investments.

Your Market And Who Needs This Service Or Product

Your pitch deck should include some descriptions on your target market (Total Addressable Market and Serviceable Available Market). Basically, who needs the product or service that you are developing. Like the story of your idea, this section is also often told best with a brief narrative that explains who will use the product and why.

We call these your ideal customer avatars. You want to create use cases for the various avatars you come up with in order to perfect your pitch deck. Your client avatars are described by gender, age, income range, education, employment, and the challenge you are trying to help them overcome with your business. To name the basics for your avatar.

For example, suppose that you are pitching the idea of a vacation home rental service like Airbnb. Your market is reasonably evident in that travelers will use it. The question that investors will have is why they will pick your service over a hotel? After all, travelers can trust that most hotels will be clean and provide a quality experience. The same is not necessarily true for people’s houses.

Your perfect pitch deck might explain this by suggesting that hotels are pricier and provide a less authentic experience. For people looking for a quality experience in a new city or country, there’s no better way to feel like a local than to live like one!

Images And Graphs

If that perfect pitch deck of yours contains too many words, you’ve probably done too much explaining! Pitch decks should be short, precise, and provide lots of images and graphs that succinctly explain your points. If you have paragraphs of text, people won’t read it, and it will dilute your message. Have your deck be as concise as possible.

It’s also essential to be mindful of the text that you do include. Any words that you use should have significant meaning and should be genuine highlights for your company. Show key metrics, accomplishments, and aspirations for your business. For example, a graph showing the trajectory of your estimated sales works much better than trying to explain it in a paragraph of text.

Your Competition

It’s been said that “any business that doesn’t have some type of competition, isn’t a business at all.

Acknowledge your competition in your perfect startup pitch deck. Showcase what will differentiate your service from theirs. Your investors will know the market pretty well. They’ll know your competitors and how they are doing. They’ll be keenly aware if you’re a newcomer on the scene looking to take on a gigantic behemoth or you’re carving out a niche for yourself that nobody else has done yet. Either way, address the question of your competition so that way your prospective investors know why you believe that your product will succeed.

Dedicating a small section of your pitch deck to your competition also provides prospective investors with a feeling of humbleness, trust, and honesty. Some founders will incorrectly assume that because they have made something that people will use it. In reality, every single product has to differentiate itself on the market. If you build a site like Twitter, people will continue to use Twitter. If you make a social media site with a different take on it, then you can say, “yes, we know Twitter is popular, but here are the reasons why we believe users will switch.”

It’s essential to keep your competition statements as objective as possible. Subjective competitive advantages (e.g., your product looks better) are not as strong as the features that other products or services in your domain don’t have. Saying that your website is sleeker is not as strong as saying that your product can get the users’ results 2x faster than the competition. Objective measurements as to why your offering is better will hold the most sway with your potential investors.

By acknowledging your competition, you are showing prospective investors that you have thought deeply and maturely about your startup.

Metrics

While every pitch deck is different, savvy investors look for some key metrics to get a feel quickly for how your startup is doing. You may not have all of these metrics worked out at the seed and angel stage, but you will definitely need to have this nailed down by the time you get to you’re around.

These metrics indicate to the investor that you know the basics and are addressing the key metrics they will be interested in. This is true even if the metrics are quite as good as you wish at the current point in time. However, you can acknowledge the metric and point out how you plan on improving it or address the issue. That will go a long way to showing the investor how professional you are and how you can be trusted with their money.

Here are the top 11 Key metrics we recommend including in your pitch deck:

Key Terms:

  1. MRR: Monthly Recurring Revenue
  2. CAC: cost of acquiring customers
  3. LTV: lifetime value of the customer
  4. ARPU: average monthly revenue per customer
  5. Total Customers: Sales Funnel – Churn
  6. Churn: customers that drop out
  7. Cap Table: A Capitalization table (or cap table) is a table providing an analysis of the founders’ and investors’ percentage of ownership, equity dilution, and value of equity in each round of investment.
  8. Liquidation Preferences: the companies’ later-stage investors have basically received the right to get paid ahead of other investors, as well as the companies’ management teams and employees
  9. CAGR: Compound Annual Growth Rate (CAGR) – Investopedia
  10. CPA: Cost per Acquisition
  11. TAM: Total Addressable Market
  12. Traction: How many clients you have and what is the growth month over month

Some of these metrics are more involved than others. Depending on what stage your startup is in and what your revenue, sales and traction are will all feed directly into your metrics

Milestones

Milestones are important to include in your deck as they show you have a timeline in mind. If you don’t have objectives, investors will quickly become concerned that you haven’t considered schedules. Important milestones include when you’re looking to release your product to the public and when you’re first looking to advance to the next stage of funding. Put reasonable dates for when you expect to hit them. Even though your dates and times might not be perfect, they will at least give investors some timeline for when you hope they can exit their position.

Pitch Deck Length?

Now that we have looked at the seven things that you should include in your pitch deck, the next question that many startup investors have is: how long should it be?

Many successful startup pitch deck have been on the order of 15-20 slides long, which is a perfect length. Usually, they contain an introduction, followed by a problem description. The idea is to get your prospective investors thinking about your product within a larger narrative. By describing the problem, you set yourself up to explain how your product will solve that issue.

Next, startups might wish to follow that up with the product information slides. You can use one or two slides to show your product and how it will transform the industry. People typically follow that with the business model and market information to describe how the enterprise will be successful.

Once you’ve presented the business model information, the next slide or two typically discuss the competition and what competitive advantages your product has. After your competitive advantages, you can showcase your team and let the prospective investors know that your team can handle the competition and create a superior offering.

Finally, you can include timelines and milestones to let your investors know how long of a commitment they would be looking at making, and when they could expect significant developments.

After you add slides for each of these components, you typically have a deck of 15-20 slides, each with minimal text. If you have a pitch deck that is longer than that range, it may not keep your prospective investor’s attention. Similarly, too small of a slide deck results in your potential investor not feeling comfortable enough to write you the check. Finding the right balance can make the difference between a wildly successful pitch and one that doesn’t make it.

Conclusion

Remember that the goal of your perfect startup pitch deck is to interest a potential investor enough that they will want to meet with you and begin a discussion. Few, if any, savvy investors have invested directly after looking solely at a startup’s pitch deck. The exception to this rule would be an investor who is already aware of a startup and has very strong recommendations from other investors that he/she trusts.

Nonetheless, for startups, the pitch deck is incredibly valuable. It is the method for attracting capital into the company. To ensure that your business quickly receives investments, make sure that you include information in your deck about your product and team. Investors want to know what they are investing in and in whom they are giving the money.

Beyond that, your deck should include product information, marketing info, and information about the competition. You’ll also want, likely, to add your milestones and key metrics as well.

A quality of a perfect startup pitch deck attracts investors. Your pitch deck is a marketing tool first off. It should be informative, of course, but also pleasing to look at and easy to read.

One option is to do an online search to find pitch decks that were used by behemoth technology companies. With a quick search, you can see what pitch decks Airbnb, Facebook, and Uber had. When you open these up, you should get a feeling for how to structure your pitch for maximum effectiveness.

Given the significance of your pitch deck and how it will impact your business, please take care to construct it carefully. Your pitch is not something that you should rush or throw together an hour or two before the meeting. Instead, consider taking a few days to create it, dwell on each slide, and find optimal ways to make it better. Share your pitch deck with trusted friends and advisors to get their feedback as well. That way, you’ll have a well-thought-out presentation that will dazzle the minds of your prospective investors.

Don’t rush your pitch deck. Take the time and create one that will showcase your fantastic business, ingenuity, and talent!